“Buyer beware” at tax sales

Purchasing a tax deed on the courthouse steps has risks which require a purchaser to conduct due diligence.  A 2009 decision by the Georgia Court of Appeals highlights the risk of failing to do so.

A tax deed buyer paid $161,000 for 3.64 acres of unimproved land, mistakenly believing it was buying a two-story house.  Despite the published notice listing the wrong defendant in fi.fa., it was not set aside under OCGA 9-13-172 which allows courts to set aside sales for “fraud, irregularity, or error to the injury of either party …”.  The Court of Appeals held that this statute does not apply to errors in the tax sale notice.  Instead, it held that “defects in following the notice provisions of the tax sale statute may give an injured party a claim for damages, but will not render the tax sale or the deed therefrom void.” Hash Properties, LLC v. Conway, 298 Ga. App. 241, 243 (2009).

But the key part of the Hash Properties decision was the observation that the purchaser failed to exercise due diligence prior to purchasing the property, and therefore could not raise a claim of irregularity in the tax sale.  The buyer did no research, did not visit the deed room to search the deed records, did not review a subdivision plat, and did not search the record for mortgages.

The Court of Appeals invoked the buyer beware or “caveat emptor” doctrine, holding: “It is well settled in Georgia that the purchaser at a tax sale comes within the doctrine of caveat emptor and is presumed knowledgeable of any defects the record discloses despite any statements to the contrary made by individuals.” Id. at 244.